U.S. report sings NAFTA's praises

Study results counter critics who blame the three-year-old trade pact for
lost U.S. manufacturing jobs

                                                    By PETER MORTON
                                             Washington Bureau Chief The
Financial Post
A boost in exports to Canada has created 189,000 U.S. jobs over the past
three years, according to a U.S. administration study on the North American
Free Trade
Agreement.
The three-year-old pact among Canada, Mexico and the U.S. created 311,000
of the 8.6 million new jobs in the U.S. between 1993 and 1996, and
eliminated the
U.S. trade deficit with Canada, President Bill Clinton said yesterday.
"NAFTA has also contributed to the prosperity and stability of our closest
neighbors and two of our most important trading partners," Clinton said.
NAFTA was especially important during the 1994 Mexican peso crisis because
it prevented the Mexican government from shutting off imports as it did in
1982,
said Treasury Secretary Robert Rubin. "It took Mexico seven years to return
to international financial markets after its crisis in 1982," Rubin said.
"This time, it only
took seven months."
The Congress-ordered assessment of NAFTA comes as Clinton prepares to
launch a fall
campaign to persuade skeptical politicians that the trade agreement should
be expanded to Chile
and Latin America. "We are only in the third year of a 15-year market
opening agreement," said
Trade Representative Charlene Barshefsky.
The detailed study looks mostly at the impact of including Mexico in the
Canada-U.S. free trade
agreement of 1989, since almost all of U.S. concern about NAFTA is centred
on its southern
neighbor.
Most labor groups and NAFTA opponents say Mexico is simply stealing
manufacturing jobs
from the U.S. A report by the labor-sponsored Economic Policy Institute
said this week that as
many as 250,000 U.S. jobs have been lost.
But Barshefsky said exports to Canada and Mexico support 2.3 million
American jobs, up from
the 1.9 million before NAFTA came into effect in 1993. About 1.6 million of
those jobs are a
result of exports to Canada, mostly in the automotive industry.
The study ignores trade irritants among the partners, especially U.S.
concern over Canadian wheat imports, which have reached record levels since
NAFTA was
implemented in 1994.
An independent study of NAFTA by DRI-McGraw Hill done for the
administration says NAFTA increased U.S. economic growth by US$13 billion
in 1996.
Other studies, including one from the Dallas Federal Reserve bank, failed
to find any significant impact.
Canada is the largest trading partner of the U.S., providing annual two-way
value of US$290 billion. Mexico is America's third-largest partner, with
two-way trade
of US$131 billion last year. "NAFTA represents one-third of U.S. global
trade," Barshefsky said.
The report concentrates largely on increases in exports and says higher
imports to the U.S. from Canada and Mexico have been largely a result of
the strong U.S.
economy.
Although Canada's trade surplus with the U.S. has widened since NAFTA came
into effect ( to US$22.8 billion in 1996 from US$10.8 billion in 1993 ) 
the
Clinton
administration points out that the deficit is wiped out when trade in
services is included.
NAFTA also created free trade in areas such as travel, shipping and
computer services. Canada's services exports to the U.S. have risen nearly
17% over the past
three years, while all such U.S. imports have risen 11.3%.
Nevertheless, Canada's deficit in services is just over $9 billion, leaving
it with a current account deficit with the U.S. of $1.7 billion.
The Clinton report on NAFTA also points to some areas where employment
growth has been especially strong. In the automotive industry, the number
of U.S. jobs
increased 14.1%, while Canada's gain was only 5%. In Mexico, the number of
jobs in the sector fell 8.4%.
In its own report on NAFTA, Ottawa said there has been a 13.8% increase in
trade with Mexico and the U.S. during the first three years of the trade
pact.
Ottawa's report did not say how many jobs were created or lost because of
NAFTA.
NAFTA eliminates almost all import duties between Canada and the U.S. next
year.
The average duty is now about 0.22%. Duties on goods shipped to Mexico are
to be eliminated in 2005.